After showing initial strength, global coffee prices fell back towards the end of the period under review following reports of rains in Brazil and no hurricane damage to Vietnam's 2006/07 robusta crop. The ICO composite indicator price rose slightly from 94.14 to 95.54 cents/lb, while Colombian mild arabicas (daily weighted average) added 2.86 cents to close at 111.91 cents. Other mild arabicas closed 3.34 cents lower at 110.82 cents. Brazilian natural arabicas rose from 97.33 to 99.22 cents, while robustas lost 96 points to end at 75.36 cents.

Heavy rains fell in Vietnam's Central Highlands coffee growing area after Typhoon XangSane hit the central coast but did not hurl robusta trees. However, it was not excluded that heavy rains brought on by the storm could again delay arrivals of fresh beans. Sporadic activities have started in many growing areas but there is not enough quantity to offer, the spokesman added. Typhoon XangSane marked the end of Vietnam's 2005/06 coffee crop year with production estimated to have fallen to 12.5 ntln 60-kg bags from 13.9 min the previous season. The country has received adequate I rainfall for the 2006/07 crop with official estimates probably on the j low side. According to the Vietnam Coffee and Cocoa Association (Vicofa) the forthcoming crop stay not reach more than 14.0 mln bags. while the United States Department of Agriculture (USDA) had pegged the crop at 13.85 mln and the ICO at 14.5 ntln. However, these estimates are deemed too low based on the return to normal precipitation and the trees' ability to flower following stress in the prior two years. Traders now said that the new crop would yield tip to 18.6 mln bags which would greatly help to end tightness in the robusta sector.

September Vietnamese coffee exports were reported by the General Statistics Office (GSO) at only 833,000 bags compared with 1.5 mln bags in September 2005, reflecting the smaller crop and limited stocks. Total exports this year are down by 8.20/'o. according to the GSO.

Reports of rains in Brazil led to heavy losses on the arabicas market when unwinding of weather premiums set off a storm of automatic sell orders. Meteorologists said that much needed rains were received over the past few days and coffee areas would get more precipitation over the next few days. This will improve the condition of the trees and flowerings in the growing regions. Cumulative rainfall in September in many areas though. even with recent beneficial rains, was still below normal for thjs time of year. Rainfall in October is also forecast to be on the lighter side, but probably sufficient to ensure that the early stages of the crop's development will be normal.

The Brazilian coffee market remained on an even keel with no major sales by producers. Farmers arc largely intent on holding onto as much coffee as they can to control supplies. Most coffee farmers are pleased with world supply and demand even though the exchange rate of the real versus the dollar remains unfavourable for them. The coffee industry, is waiting for the October 29 run off after President Luiz macro Lula da Silva on October Ist got 18.6% of the vote and not an absolute majority. Lula was expected to win the first round. Buoyed by a stable economy. Second-place finisher Gentldo Alckmin, the centre-right firmer governor of Sao Paulo states. Now has a month to hammer Lula and his workers party on corruption and other issues.

As expected, exports by exporting members of (he International Coffee Organisation (ICO) to all destinations were higher in August than in the sane month last _tear as it was already known that Brazil shipped substantially more coffee this year than last during August and Colombia also increased the volume of coffee shipped. Consequently, August exports rose to 8.361 mln 60-kg bags front 7-078 min exported the same month the previous year. 'that brought total exports in (he first eleven months of 2005!06 (October.-September) to 80.066 ntln bags, 3.5% less than the 82.()94 mln exported the same period in 004:05.

In Colombia, the mitaca crop has fared much better than the main crop did and this has helped to boost total production figures for the 2005/06 season which officially ended at the end of September. The August production figure that's more than 77% higher than last year and (his has brought total output up to 11.14 min bags after eleven mouths of the season compared with 10.87 ruin a year ago. As a result of higher production, Colombia was able to increase exports to 1.01 min bags compared to 759.000 bags shipped in August 2005. However. cumulative exports remained below year-ago levels at 10.54 min bags versus 10.78 mln in the first eleven months of 2004!05,

The latest Contingent of Traders Report showed that non-commercial investors reduced their net short position to 2.638 lots as of September 26 from 3,781 lots in the previous report. Small speculators (non-reportables) increased their net long position from 2,374 to 3,326 lots. Producer hopes for higher prices seem to be justified at least judging by the ICO stock estimates. World coffee stocks are currently at around 35 min 60-kg bags. International Coffee Organisation (ICO) Executive Director Nestor Osorio said. This level marks an all-time low, according to Osorio. including when Brazil had a major frost in 1976/77. He said that stocks could technically be as low as 33 min bags and added that roasters told the ICO that this could be a compromising situation.


Courses' 1 O.Liclrt'.c International Cojlee Report, VoL21, No.9 / 06.10.2006

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